Best DSLR + lens combo for low light, indoor kid shots

Due to the release to the D5200 I think one of the best value deals for your situation would be to snap up a remaining D5100 Body ($500) 35mm 1.8g DX Lens ($200) for indoor close quarters, a Nikon 50mm 1.8g -effectively 75mm - ($250) for a little more reach and nicer bokeh in portraits, and a Sunpak PZ42X flash ($150) to fill in when needed. Also a compatible flash diffuser ($20)

What kind of crazy advice this is? Have you never photographed kids running around indoors, or do you live in a palace with huge rooms?

What are you going to get using 50mm on APS-C (75 equivalent, or 80mm on Canon)? Just a boring contextless headshot of a single child, no friends they are running after, no parents overlooking - and that is if you manage to keep him/her in your frame! It is boring and useless, you'll never be able to remember who was on the party and what was going on! And 35 mm on APS-C is only slightly wider, still not useful for any kind of company!

I live in a pretty typical American 2300 sq ft house with typical living room size, and when I take the picture of kids running around, playing on Playstation etc, it is always 24 mm equivalent or so. And with even that I have to back out of the living room sometimes to get the whole bunch into the frame.

For APS-C it would be 16mm (or 15mm for Canon). Unfortunately, there is no such thing as fast wide for APS-C. The best bet is Tokina 11-16/2.8 or one of the 16-50/2.8 standard zooms, but at 2.8 you'll hit AutoISO limiter (6400 on most those APS-C DSLRs) in no time in typical living room evening lighting.